Forex Market Review – Euro lifted after German data but reverses after weak US retail sales

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The euro rose during the European trading session, after being lifted by upbeat German survey data and well-received European government-debt sales. Earlier in the Asian session, euro tumbled on news of downgrade of six EU countries by Moody’s Investors Service. Sentiment was boosted by the German ZEW economic index for February showed that German economic expectations improved far more than expected, rising for a third straight month. Further helping lift market sentiment were successful debt auctions in Italy, Spain, Belgium and the Netherlands.

EURUSD rose to a European session high of 1.3214 before the open of the New York session, climbing from a low of 1.3129. EURGBP bounced to 0.8388 from 0.8362. However, the positive mood was hurt in the US session overlap in early New York trading following data showing that US retail sales rose less than forecast in January. This led the euro to reverse direction to fall to 1.3138 against USD.

GBPUSD rebounded from a two-week low to 1.5769 but fell back down to 1.5693 by the end of European trading. The pound is under pressure by Moody’s threat of cutting the UK’s triple-A credit rating.

The positive sentiment helped lift commodity-linked currencies of Australia and Canada higher against the dollar in European trading hours. AUDUSD hit a European session high of 1.0731 from 1.0666. USDCAD moved lower from 1.0018 to 0.9977. However gains were reversed after weaker than expected US retail sales data dampened sentiment in early New York trading hours.

USDJPY rose to 78.17, its highest level since January 25, due to a weaker yen after the Bank of Japan easing monetary policy today.

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